Good Debt or No Debt: Where Money Teachers Split
One camp tells people to eliminate every loan before doing anything else, and another says borrowing well is how wealth gets built. This piece sets out each case and who each piece of advice is meant for.
Whether debt can be good depends on who is borrowing. Every one of the five money teachers here calls borrowing for consumption a mistake. They split on borrowing to buy assets, and read closely, each is addressing a different person. The no-debt case is built for people whose spending is the problem. The good-debt case is for people who already have margin, deals and the knowledge to read a contract.
George Kamel of The Ramsey Show says to take debt off the table entirely, with a modest mortgage as the only exception, because "debt equals risk, more debt equals more risk". His evidence is the founder's history: Dave Ramsey knew how to make money in real estate but was so over-leveraged that he lost it all. Kamel treats debt as a behavior problem and pays the smallest balance first for momentum. He adds that income does not solve it, citing a study that 40 percent of people earning over $500,000 live paycheck to paycheck.
Anthony O'Neal reaches nearly the same plan. He estimates that 95 percent of Americans cannot borrow money and use it to buy assets that pay the loan off. His rule is "Margin is your number one wealth building tool." He does keep a charge card that he pays off every Monday, and says to be free of consumer debt for at least 24 months before getting one.
Caleb Hammer, who audits real people's finances, says bankruptcy and consolidation make no sense unless the behavior changes first. He departs from the Ramsey camp on houses, arguing that renting and investing the difference often beats buying.
Grant Cardone is the clearest voice for borrowing. He says he went from $50 million of debt in 2008 to $1.2 billion when COVID hit, and that this is what he wants. But he calls consumer debt terrible. Good debt finances an investment that a tenant or customer pays off.
Sharran Srivatsaa says telling people to cut up their credit cards is like telling them never to drive. The skill is using debt to buy assets. He supplies tests: would your future self thank you, is the worst case getting your money back, and how much pain can you handle. He also lost a million dollars to a con man, which shows that knowledge does not remove risk.
Beyond consumer debt, they agree that looking rich is the enemy and that you should spend less than you make. They draw opposite lessons from a crash. Ramsey was over-leveraged and lost everything, so that answer is no debt. Cardone was too small in 2008, so his answer is scale. The article notes that debt magnifies whatever the borrower already does.
There are limits. Cardone borrows against a portfolio in the billions, and nothing shows the same approach is safe for a household buying one rental. Survivors are telling these stories. And these are opinions, with the right answer depending on income, obligations and temperament.
What to do with it: sort your debts into what bought things that lose value and what bought assets someone else pays for. Build a cushion before attacking debt. Pick a payoff method you will stick to. Change the habit before consolidating. Add friction to spending. Buy the car you can pay for. Before borrowing to invest, run Srivatsaa's checks. And decide which person you are being advised as.